UBSâ in-house hedge fund, set up to retain talented staff, is to begin accepting outside capital by the end of this year.

Dillon Read Capital Management, the subsidiary which manages the fund, will launch additional funds to manage outside investor assets. The business is run by John Costas, the Swiss bank's former chairman and chief executive of investment banking,

UBS would not commit to a specific date to open up its service, but said new funds will be offered to institutions, such as pension plans, foundations and endowments, and potentially also to high net worth individuals.

UBS always planned to eventually accept outside capital in Dillon Read as the bank expanded its hedge fund business and revamped its wealth management units. UBS invested roughly $2bn (€1.6bn) in Dillon Read, set up last year and officially launched on June 5 this year.

Dillon Read focuses on fixed-income investments and includes 120 traders who were part of a group that traded debt and commercial real estate for UBS’ own account. Dillon Read was formed out of UBS' principal finance and commercial real estate businesses as an in-house hedge fund.

UBS set the fund up in an effort to retain talented staff that might otherwise have left the bank to set up or join hedge funds.

The move to retain top talent did not deter trader Jon Wood from leaving the bank to launch his own hedge fund. Wood raised $3bn for SRM Global Fund, which will launch next month. UBS itself is investing $500m in Wood's fund for at least five years.